Abstract
Incertitude about expected returns is one of the criteria which influence the largest number of strategic investment decisions. Thus the relationship between risk and return is a fundamentally financial relationship, because it affects expected rates of return on investment. This relationship between risks and returns holds true for individual investors and business managers. Returns are the financial rewards obtained as result of making an investment. There are different types of returns, depending on the investment. Investments could be bonds, loan, and shares. The definition of risk is more complex than the definition of return. A risk in investment is defined a significant possibility of having a return that is different from the expected return. There are two types of risk analyses; one is the stock market analysis for shares, and the other, about credit analysis for loans and bonds. We are going to focus on the first one which has more risks, and will also provide some details about the second one.
The target of the document is to understand the relationship between risk and return and thus be in a better position to achieve financial goals.
It is an established fact that there is a relationship between risk and return, is this a relevant concept which needs to be taken into account during a financial decision making process?
On one hand, it's necessary to know how recognize a risk and return relationship, and on the other, it is relevant to analyze if this relationship is positive or negative one for investor's decisions?
